What’s bad for the economy can be good for you

I love when people who studied economics think they know personal finance, because they’re usually completely wrong. What’s more, they “think” that because they can draw a demand curve, they understand how to invest and grow their money, which can be even more damaging than a Chico state graduate who knows he doesn’t know anything.

That’s why I found this exchange on Megan McArdle’s Atlantic Monthly blog so fascinating.

The first two comments are priceless:

Todd: “What’s so grim about it? As a consumer, I see a photo tour of an impending wave of massive discounts.”

Nelson: “That’s how I view the housing market.”

Exactly. What’s bad for the economy is often very good for consumers who are prepared.

too bad those “who are prepared” are in such small number they don’t really matter much for “the economy”. As my latin teach would say: “Una hirundo non facit ver”. [One Swallow does not make Summer – Horace].

And don’t be snarky, Ramit. You like to get people riled up, so why are you getting upset when they do? If you want to have intelligent and meaningful comments, then speak to people in an intelligent and non-condescending tone.

I think you made a good point. But the paragraph where you insult people and tried to be funny — well that was just distracting and detracted from what you were trying to say. The comment didn’t offend me (I’m not American, so I didn’t understand it anyway), but I think it’s a rookie writing mistake. If you want people to take you seriously, stop making ignorant and arrogant comments. It detracts from your ethos.

I was an Econ student who gets Personal Finance. Of course I’m technically an IT guy who gets Personal finance.

Great deals are out there right now if you have the cash. I just wish this all had been put off for a few more years as I’ve only been out of college for less than two years (hardly enough time to save for a house after paying down student loans but I’m getting there.) There are great prices on houses, cars etc. even in the “country” where I am.

Hmm..I too have seen great deals in almost every market sector. Taking advantage of a great deal can be very satisfying, but you know, those with money to spend shouldn’t be rushing out to buy things they don’t need just to get the deal. And on the housing front, buy what you need at the discounted price rather than spending what you would have spent 2 years ago and getting more with it. That is my outlook on these issues in general.

Either you are going to see the sky falling and withdraw into your shell, or you will see tons of opportunity and be busy creating your economy during this time. The choice is up to you. Choose wisely!

I’ll defend the Chico State comment to the death. While a pair of Chico guys saved me from a miserable time when I was traveling around Europe at age 17, every other experience of the species has fit the stereotype Ramit was invoking.

I have the exact same response to news about housing prices continuing to collapse here in Southern California. I don’t even have the twinge of guilt that I used to feel.

If you see all of those cars moth-balled and think “Oh, discounts!” you are being just as foolish and short-sighted as the folks who sell out of the market at the first sign of a downturn. And, to top it off, unlike the chicken-littles, you are being greedy.

What is good for you over the next month or two is not necessarily good for you over the next 5 years.

in addition to loving it when econ majors think they know personal finance, i also love it when people without financial backgrounds like to blog about personal finance. (that’s a jab directed at frugality sites). 😉

I’ve been saving money to replace my car for a couple of years. This is a great time for me to buy. It’s called capitalism – buy low, sell high. Last year I was trying to buy a car and the salesmen absolutely refused to negotiate with me. They were trying to charge over MSRP and wouldn’t budge. I walked away because it was more than I wanted to pay. Now they’re falling all over themselves, I’m looking for the best deals for my money.

I went to Kent Read, Kent Write, Kent State in Ohio. I’m just glad the Chico grads get hassled as much as we do.

Fortunately I went to a state school that didn’t cost an arm and a leg, I have a decent job, and since I owe practically nothing on my student loans, I’ve saved up a year and a half of salary since I’ve been out of school (just a few years). The economy sucks and the world is my oyster. Now if only I wanted to buy something…

Being prepared (for me) means keeping my chin up even though the value of my home has decreased dramatically. Was housing over-valued, probably. Am I planning on selling, no. Does it make it any easier to watch an “asset” dry up over the course of a couple weeks? Not really.

Per your point above: “I’ll try to write a post that…offends absolutely no one. I’m sure people will be really eager to read that.”

Um…I would hope that you are motivated by the quality of information you bring to your audience, rather than sensationalism, but I’m not sure. Maybe, like the majority of your posts since starting the Scrooge Strategy, this is just another one of your tired and obvious attempts at getting buzz and marketing yourself.

Primarily I found the comment embarrassingly immature. Do you think so little of your target demographic that you believe you need to insult others to keep their attention? How about just going back to the quality of the well thought out posts you wrote before the Scrooge Strategy.

I do not agree with you here. I think you are simplifying this too much. You narrow the buying decision to just the price of the car. But, a lot more should go into that decision–including your ability to afford that car. The majority of the time, this is directly influenced by the overall economic outlook. I think it is difficult to separate the two.

Matt, I completely agree. If you are simply buying things because they’re cheap, you’re not seeing the whole picture. But if you’ve been preparing for a large purchase, then what’s bad for the economy (excess supply, low demand) can be great for you. Price is only one of the concerns, though. Good point.

@Battra92: It’s not a feeling of hatred or elitism regarding college. I took a jab at finance blogs written by people without finance backgrounds (not necessarily college degrees… you used to be able to become a certified financial planner without a college degree). A lot of times they don’t fully understand a lot of the nuances of personal finance, so all they can write about is frugality. Personally, i’d rather read a personal finance article written by a CFP or PFS than the cashier at the supermarket. (no offence to cashiers…i used to work as one too)

the econ major thing is ramit’s pet peeve. although i would rather read an article written by an econ major than a cashier.

Ramit, you’re awesome. Your occasional snark is one of the reasons I read this blog. When you’re too worried about offending readers, you lose readers because you no longer have any personality. I’d rather be offended & entertained than bored by reading something “safe”.

And this post makes a great point about being optimistic when things look grim – which is what the point was really supposed to be. This isn’t saying that cars are cheap so you should go grab a bunch of them, but if you need a new car, then the downturn of the economy has a silver lining for you. I AM going to need a new car pretty soon, and seeing posts like this makes me feel much less nervous about the purchase.

We’re also moving later this year, and property values in our future hometown are down – that means we’re gonna find a decent place to live for much less than we would have paid 2-5 years ago. We’re at a point in our lives where alot of changes are being made, and these transitions are being made much easier by the fact that things are less expensive than they used to be.

So thank you for this post, Ramit. I’m sorry to see so many readers not understanding it.

I think following an economist’s pf advice is about as accurate as following the weatherman’s advice. My 401K portfolio isn’t completely in the toilet because I did the exact opposite of what econ talking heads were saying back in October. If the weatherman says it’s going to be sunny, be sure to pack your umbrella.

Hi there..well I guess everyone has their way of doing things and understanding….not all expert can claim that their truly expert in their work…but chances must be given for them to prove their findings….all of us need to learn and keep up learning until we die…learning never stops and take a smart way to implement it for the benefit of ourselves and our society….may god bless us…

Ahh… Chico State. Where the average student’s B.A.L. is twice that of his G.P.A.

People, take a joke… for once. Dang, I went to a state funded primarily agricultural school, though I got my degree in engineering. Regardless, we’re called hicks, farmers, etc. by the neighboring schools. It’s just a rivalry thing. Get over it.

Ramit, if you want more fodder, I’m quickly approaching middle age, shorter than the average American male at 5′ 5″, and balding at warp speed. Oh, and I was raised in the South. Feel free to poke fun… I promise not to lose sleep over it.

@Chris, yeah I guess it’s like how people who go to Stamford think they went to an elite school like MIT or Yale. 😉

*Note: I went to a state college and commuted but I do watch the free Yale lectures on-line.

@lordskip: gotcha, though there are times when amateurs know what they are talking about. As a photographer I’ve seen quite a few people who write about photography who don’t know crap about it – and they are “pros.”

sorry to be OT – but this is same as what is good for a community/corporation is bad for you. For example, the more you work the better your company is.. but you will be more exhausted.

And we all know how politicians have been “protecting” us.
The best thing is to plan your activities accordingly and tune them when required. For example, an investor in a third world country might find great deals[same goes for US of A – which is the theme of this post].

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About Ramit Sethi

Ramit Sethi is the author of the New York Times bestseller, I Will Teach You To Be Rich. He writes about psychology, entrepreneurship, careers and personal finance for over 750,000 monthly readers on his website.